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The Best Opportunity This Decade

The sky is falling! But isn't that manna?

Over the past 60 years, the United States has seen, and survived, 10 recessions (not counting the one we're currently in). From the shortest one -- six months in 1980 -- to the two that spanned 1973-1975 and 1981-1982, we've muddled through and come out the other side. In between each, we've experienced, on average, almost five years of expansion.

So while we could be in another recession right now, I'm excited!

Pardon me while I wipe my chinFirst, we have a whole bunch of people running around in panic mode crying, "The sky is falling!" They don't want to hold stocks during a recession, so they're willing to sell them -- cheap.

Second, the news media fans the flames of panic with constant stories about weakening consumer spending and how the recession is hurting everything from Amazon.com to ZymoGenetics.

Third, we've got a handful of really hated companies. Specifically, I'm talking about the banks, thrifts, and builders that caused and are feeling the fallout from the mess we're in.

What does that add up to? Bargains, bargains, bargains!

Like a kid in a candy store ... and the candy's on saleOne option is to search among the beaten-down banks. In that space, BB&T(NYSE:BBT) is an intriguing company. While it's increased its provision for loan losses, it isn't nearly as exposed to mortgage problems that were the bane of institutions such as Ambac Financial(NYSE:ABK). But that hasn't helped its share price, as it's been caught up with the rest of the market. This firm is looking tasty!

And if you don't want to invest in a bank, but still want exposure to the financial sector, consider MasterCard(NYSE:MA). It takes a fee from the millions of credit card transactions executed daily without being on the hook for the amounts charged. So-called tollbooth companies can make excellent investments.

Then there are (still) the retailers, trying to survive declining same-store sales and decreased consumer spending. This is where a strong balance sheet is helpful. Family Dollar Store(NYSE:FDO) has a great one -- $152 million in cash and none of its $250 million is debt is due before August 2012, with the vast majority due after 2013. Even better, it actually reported same-store sales growth of 9.4% in the just-completed quarter, accompanied by an 11.2% year-over-year increase in revenue.

Even some big-name companies have been dragged down. Starbucks(NASDAQ:SBUX), dealer to our caffeine habit, is one such example. The stock has been falling for most of the past two years, partly from its own problems, partly from the current consumer environment.

Finally, consumer products and tech have gotten interesting of late. Giants Kimberly-Clark(NYSE:KMB) and Cisco Systems(NASDAQ:CSCO) are off significantly from their highs of late 2007. All the talk about lower consumer and company spending may have driven their prices down. For my money, I'm more interested in companies I can buy today to own in 2014 -- so thanks for the bargains!

To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10, and 20 years from now.

Bill Nygren, another great value investor, agrees. Looking at this type of economic situation, he wrote, "What usually happens is that suffering industries begin to recover, the next crisis comes from somewhere least expected, and the cycle of creating new investment opportunities starts anew. We have no reason to believe it will be different this time."

These gentlemen know that investing today in areas that aren't well-liked will position your portfolio for the eventual end of this bear market. There will be another bull market. What we have now is the chance to grab some good companies while they're cheap.

So what are you going to do? Stop investing in stocks altogether, worried that things will be different this time? Or listen to master investors (not me -- Buffett and Nygren!) and look at some opportunities?

I know what I'm doing.

Finding valueIf you'd like some help in figuring out if a beaten-down company is worth investing in, take a look at our Inside Value service. Philip Durell, Ron Gross, and team look in downtrodden areas of the market, just as Buffett and Nygren advise.

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This article was first published on Feb. 12, 2008. It has been updated.

Jim Muellerowns shares of Starbucks, but no other company mentioned. The Motley Fool owns shares of Starbucks, too, which is a recommendation of both Stock Advisor and Inside Value. Amazon is also a choice of Stock Advisor. Kimberly-Clark and BB&T are Income Investor recommendations. The Fool has adisclosure policythat believes, deep down, that the market will turn around.